Electric car producer Tesla will build its first factory outside the United States in Shanghai, becoming the first wholly foreign-owned automaker in China.
Tesla Inc.'s announcement comes amid mounting U.S.-Chinese tension over technology and follows Beijing's April promise to end restrictions that required foreign automakers to work through local partners.
Tesla said construction would begin in the near future, once official permits are obtained. It said production would begin two to three years after that and eventually increase to 500,000 vehicles annually.
FILE - In this April 15, 2018, file photo, the sun shines off the rear deck of a roadster on a Tesla dealer's lot in the south Denver suburb of Littleton, Colo. Electric car producer Tesla says it will build its first factory outside the United States in Shanghai. Tesla says an agreement signed Tuesday, July 10, with a Shanghai city government agency calls for construction to start in the near future. (AP Photo/David Zalubowski, File)
No financial details of the agreement signed Tuesday were announced. A city government statement said the factory would be the biggest foreign investment to date in Shanghai, a base for joint ventures between General Motors Co. and Volkswagen AG and a state-owned automaker.
The signing ceremony was attended by Tesla chairman Elon Musk, Mayor Ying Yong and other Chinese officials, according to the city government.
China is the world's biggest electric vehicle market but Tesla and other producers including GM and Nissan Motor Co. had been reluctant to transfer manufacturing to this country due to the requirement to share technology with Chinese partners that might become rivals.
Tesla began selling cars in China in 2014, shipping them from its California factory, which added a 15 percent import duty to the price. Despite that, China quickly became its No. 2 market after the United States.
"Tesla is deeply committed to the Chinese market," the company said in a statement.
Tesla is among companies hit by additional 25 percent import duties imposed by Beijing in retaliation for a tariff hike by U.S. President Trump in a dispute over technology policy.
"The tariffs may have accelerated their plans for sure, but longer term they need a presence in the largest auto market globally," said Cowen analyst Jeffrey Osborne.
Tesla has discussed opening a factory in China since at least 2016. "Still need to see how it gets paid for, which has been a concern," Osborne added.
Automakers are pouring billions of dollars into developing electric car models for China.
GM, Ford Motor Co., VW, Nissan and other competitors have announced ventures with local automakers to develop models for China's lower-income market.
Sales of pure-electric passenger vehicles in China rose 82 percent last year to 468,000, according to an industry group, the China Association of Automobile Manufacturers. That was more than double the U.S. level of just under 200,000.
Beijing is using access to its market as leverage to induce global automakers to help Chinese brands develop battery and other technology.
Auto brands in China are required to make electric vehicles at least 10 percent of their sales starting next year or buy credits from competitors that exceed their quotas. Later, they face pressure to raise those sales in order to satisfy fuel efficiency requirements that increase annually.
Also Tuesday, Germany's BMW AG announced a partnership with China's biggest SUV maker, Great Wall Motor, to produce electric versions of its MINI cars.
Tesla said it also would set up a research and development facility in Shanghai.
The company said the China factory would not affect production in the United States, which is forecast to increase.
Tesla announced last year it was talking to the Shanghai city government about possibly building a factory.
The plan went ahead after Beijing said in April it would end limits on foreign ownership of electric vehicle producers this year.
Industry analysts said that the ruling Communist Party believes its own producers such as BYD Auto are close to being able to compete with global brands in performance and price.
Ownership restrictions on other parts of the auto industry are to end by 2022, the government said.
The city government statement said local authorities will "strongly support" Tesla as part of efforts to develop Shanghai as a center for electric research and production.
NEW YORK (AP) — Worries about a potentially toxic cocktail combining stubbornly high inflation with a flagging economy dragged U.S. stocks lower on Thursday. A sharp drop for Facebook’s parent company, one of Wall Street’s most influential stocks, also hurt the market.
The S&P 500 fell 0.5% and sliced some of the gain off what had been a big winning week. It looked to be heading for a much worse loss in the morning, when it tumbled as much as 1.6%.
The Dow Jones Industrial Average dropped 375 points, or 1%, after earlier falling 700 points. The Nasdaq composite sank 0.6%.
Meta Platforms, the company behind Facebook and Instagram, dropped 10.6% even though it reported better profit for the latest quarter than analysts expected. Investors focused instead on the big investments in artificial intelligence Meta pledged to make. AI has created a frenzy on Wall Street, but Meta is increasing its spending when it also gave a forecasted range for upcoming revenue whose midpoint fell below analysts’ expectations.
Expectations had built high for Meta, along with the other “Magnificent Seven” stocks that drove most of the stock market’s returns last year. They need to hit a high bar to justify their high stock prices.
The entire U.S. stock market felt the pressure of another rise in Treasury yields following disappointing data on the U.S. economy. The report undercut a central hope that's sent the S&P 500 to record after record this year: The economy can avoid a deep recession and support strong profits for companies, even if high inflation takes a while to get fully under control.
That's what Wall Street calls a “soft landing” scenario, and expectations had grown recently for a “no landing” where the economy avoids a recession completely.
But Thursday’s report said the U.S. economy’s growth slowed to a 1.6% annual rate during the first three months of this year from 3.4% at the end of 2023.
That was weaker than expected and would have been disappointing by itself. Making it worse for financial markets, the report also said inflation was hotter during the three months than economists forecast. That could tie the hands of the Federal Reserve, which typically juices sluggish economies by cutting interest rates.
Thursday’s economic data will likely get revised a couple times as the U.S. government fine-tunes the numbers. But the lower-than-expected growth and higher-than-expected inflation is “a bit of a slap in the face to those hoping for a ‘no landing’ scenario,” said Brian Jacobsen, chief economist at Annex Wealth Management.
“Things can change a lot from one quarter to the next, so it’s too early to say the Fed has failed, but this doesn’t help their cause.”
Underneath the surface, the economic report may not have been as bad as initially thought. Much of the slowdown was due to a rise in imports and other factors that can swing sharply and quickly. The main engine of the economy, spending by U.S. households, remained relatively solid.
That helped blunt the worry caused by the report, helping markets to pare their morning losses, but it did not erase the threat.
Treasury yields still climbed as traders pared bets for cuts to rates this year by the Federal Reserve.
The yield on the 10-year Treasury rose to 4.70% from 4.66% just before the report and from 4.65% late Wednesday.
Traders are largely betting on the possibility of just one or maybe two cuts to interest rates this year by the Fed, if any, according to data from CME Group. They came into the year forecasting six or more. A string of reports this year showing inflation remaining hotter than forecast has crushed those expectations.
Top Fed officials have said they could hold its main interest rate for a while at its highest level since 2001. High rates slow the overall economy and hurt prices for investments, while cuts could help inflation reaccelerate.
That puts more pressure on companies to deliver bigger profits.
Southwest Airlines fell 7% after the carrier reported worse results for the first quarter than analysts expected. CEO Robert Jordan said the airline was limiting hiring and making other moves “to address our financial underperformance” and cope with delayed deliveries of new planes from Boeing.
Textron tumbled 9.7% after the maker of Bell helicopters and Cessna jets reported weaker profit and revenue than forecast. Caterpillar sank 7% despite reporting stronger profit than expected. Its revenue for the latest quarter fell short of analysts' expectations.
On the winning side was Chipotle Mexican Grill, which rose 6.3% after reporting stronger profit and revenue than analysts expected. It said its braised beef barbacoa and chicken al pastor generated more sales.
All told, the S&P 500 fell 23.21 points to 5,048.42. The Dow dropped 375.12 to 38,085.80, and the Nasdaq composite sank 100.99 to 15,611.76.
In stock markets abroad, Japan’s Nikkei 225 slid 2.2% as investors wait to hear whether the Bank of Japan will make moves to prop up the tumbling value of the yen. Indexes were mixed elsewhere in Asia and Europe.
AP Business Writers Yuri Kageyama and Matt Ott contributed.
This story has been corrected to reflect the closing level of the S&P 500. It finished at 5,048.42, not 4,048.42.
Traders work on the floor of the New York Stock Exchange shortly after the opening bell, Wednesday, April 24, 2024, in New York. (AP Photo/Mary Altaffer)
People walk in front of an electronic stock board showing Japan's Nikkei 225 index at a securities firm Thursday, April 25, 2024, in Tokyo. (AP Photo/Eugene Hoshiko)
People walk in front of an electronic stock board showing U.S. Dollar/Japanese Yen exchange rate at a securities firm Thursday, April 25, 2024, in Tokyo. (AP Photo/Eugene Hoshiko)
A person looks at an electronic stock board showing Japan's Nikkei 225 index at a securities firm Thursday, April 25, 2024, in Tokyo. (AP Photo/Eugene Hoshiko)
People look at an electronic stock board showing Japan's Nikkei 225 index at a securities firm Thursday, April 25, 2024, in Tokyo. (AP Photo/Eugene Hoshiko)
People walk in front of an electronic stock board showing Japan's Nikkei 225 index at a securities firm Thursday, April 25, 2024, in Tokyo. (AP Photo/Eugene Hoshiko)
